RBI Announces Rs. 30,0000 Crore OMO To Prop Up Liquidity

In order to ascertain that all of the market sections function as usual with sufficient liquidity and turnover amid the current coronavirus outbreak which has resulted in considerable financial dislocations, the RBI has for the second time this week announced OMO purchases worth Rs. 30,000 crore in two tranches.

In open market operation or OMO, the RBI purchases government securities or bonds from the markets, thus in turn infusing rupee liquidity. In the current situation, such a move would absorb the additional supply with which the market is grappling on account of aggressive selling by foreign portfolio investors in the Indian bond market. In the last 7 straight sessions, FPIs sold bonds worth more than $6 billion from India's debt market.

On Friday, the yield on 10-year benchmark bonds fell the most since October 9, 2019 by 15 bps to close at 6.259%.

Next week, the RBI is slated to purchase bonds with maturity between 2022 and 2029 worth Rs. 15000 crore. The RBI auction will be conducted on March 24 and March 30.
On March 20, 2020, the RBI conducted OMO purchases of Rs. 10,000 crore and against it received bids worth Rs. 45,049 crore.

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